Author: Duane M. Tilden, P.Eng.
Report Period: April 19th to 23rd, 2018
Disclaimer: The author is an active trader in cryptocurrencies and may have variable holdings in some or all digital assets reviewed. Trading and investing in cryptocurrency markets is considered a high risk venture and requires analysis, due diligence and patience. No guarantees on outcomes are offered or implied, market performance may change due to unforeseen events which may alter market participation. The analysis and subsequent forecast are “best guesses” or opinions based on information reviewed and methodology of examination and therefore may be subject to change.
At this time I am planning to issue a weekly report and analysis. The reader is encouraged to read the analysis and familiarize themselves with terminology, cryptocurrencies and markets. Links, where deemed necessary will be included for reference and clarity.
The purpose of this ongoing blog is to develop and examine data in a scientific and methodical manner using a variety of tools to understand the movement of capital and price fluctuations in the cryptocurrency market. The cryptocurrency market is well known to be subject to volatility and can move quickly. To maximize profits a trader needs to have information into market movements which can be verified by various means of inquiry.
We will discuss these changes and explore the underlying causes. Forecasts made are our hypothesis or “best guess” and will be the basis of a Trading Plan. Changes in holdings or planned capital investments may be made to adjust holdings to the forecast. After the week we can review the results to determine how accurate our model and forecasts have been, and any required refinements.
Empowered with these tools it is hoped that those desiring to trade in these markets will be able to better evaluate portfolios and individual holdings to make buy, sell and/or hold decisions.
Weekly Analysis of Market
A. Total Market Cap
Using the tools we have developed to date let us continue with analyzing the cryptocurrency trading market using data from the past week. We seek to establish trends and using this information to forecast probable outcomes in the week ahead. To start lets take a look at the Total Market Cap (TMC) for the past week to spot the trends and chart data for further analysis.
Figure 1: Cryptocurrency TMC Weekly Graph of April 16 to 23rd, 2018
We can see that the overall trend for the week has been steadily increasing with a short dip on April 21st. TMC increased by $78 Billion from $322 to $400 bn for a weekly increase of 24.2%. Daily volume has increased by $7bn from $15.5 to $22.5 bn for a 45% gain over the week.
Figure 2: Cryptocurrency TMC 30 Day Graph – March 23 to April 23rd, 2018
This is continuing the reported upward trend from last that started on Monday April 9th where TMC was above $250 bn moving to April 12th where TMC started at $275 bn and rose by $25 bn in under one hour to $300 Billion. Daily volume peaked on April 13th to over $27 Billion traded in 24 hours. The two week change in TMC is $150 bn from $250 to $400 bn, for a 60% gain with an average rate of increase $10.7 bn/day or 7.13%.
B. Analysis of the Top 25 Cryptocurrencies by Market Cap and Price
Figure 3: TMC and Dominance of Top 25 Cryptocurrencies; April 19 to 23rd, 2018
A spreadsheet has been created to examine a variety of components of market capitalization, pricing and dominance and their variance over time. Where there are significant changes from the norm we can look for reasons to understand individual price changes and capital movement.
C. Variation in Dominance as a Predictive Indicator
The use of a dominance factor gives us an indication of the overall contribution to the TMC of an individual cryptocurrency coin or token. When this factor changes significantly over a measured period of time we may observe movements in price or MC which stand out from the overall market average.
From the period examined we have the following predictions for the upcoming week based on variance on dominance. Dominance indicates a current established trend in buying or selling. Where dominance is high and positive then for a fixed supply MC and Price will rise, and when high and negative the converse is true, that the cryptocurrency MC and Price are in a decline in value.
Caution is the word; not all declines in dominance are bad nor increases necessarily good. Sometimes when a market has moved too far in one direction a market correction may be in order and short term changes in dominance may indicate a correction. Increases in dominance should be examined for underlying cause for the cryptocurrency to gain popularity in the market.
Be aware, there are pump and dump schemes which can run up values in MC and Price for a short term while the architects of these manipulation activities profit. Generally speaking the organizers target obscure coins and tokens held on certain exchanges. Due to size and wide distribution the top 25 cryptocurrencies are considered safer from influence and price manipulation, although not immune.
In future articles I plan on performing more detailed examination of results and expand predictions or forecasts to include possible future outcomes as well as explore underlying causes to individual price movements.
Top pick for the week is Bitcoin Cash.
Top 5: Buy or Hold
- Bitcoin Cash variance in dominance increased by 28.30 %
- IOTA variance in dominance increased by 7.94 %
- Monero variance in dominance increased by 5.51 %
- Ripple variance in dominance increased by 5.08 %
- Bitcoin Gold variance in dominance increased by 4.83 %
Bottom 5: Sell or Hold
- Qtum variance in dominance decreased by -13.24 %
- Tether variance in dominance decreased by -11.27 %
- OmiseGo variance in dominance decreased by -10.96 %
- Stellar variance in dominance decreased by -8.90 %
- NEO variance in dominance decreased by -8.14 %